Demonstrators in Amman on Dec. 27, 2008, vigorously protest Israeli air strikes against Hamas militants in the Gaza Strip.Nader Daoud/APConfronted in 2008 by the rising cost of living spurred by unbridled increases in world oil and cereal prices, Jordan embarked on a plan to cushion the impact of inflation. Though subsidies were eliminated, the salaries of public- and private-sector employees were raised. Despite mounting inflation, which was a risk factor for social upheaval, the government seemed firmly in control of the domestic security situation as it also tried to cope with its 750,000 Iraqi refugee population.

The consumer price index rose over 15% in the first nine months of the year (compared with 5.4% in 2007) as a result of the increase in oil prices, elimination of fuel and some food subsidies, and the escalation in prices of imported cereals (31%), fuel and electricity (55%), dairy products (36%), transport (24%), and meat and chicken (10%). The government’s 2008 budget of $7.3 billion marked an increase of $1.2 billion over 2007, with an expected deficit of $1 billion (5.6% of GDP), compared with the previous year’s deficit of $535.2 million. The government’s economic liberalization program troubled opposition parties and the population at large. Public opinion surveys indicated that 55% of Jordanians considered themselves poor on the basis of the fact that their living conditions had worsened in the past three years. Only 13% of the population believed that their situation had improved. The Jordanian economy was growing at an estimated annual rate of 6%, compared with 4% in 2006, but government officials considered rates of unemployment and poverty high.

Two attacks against foreign tourists occurred in Amman during the year. In March a Jordanian stabbed a German tourist, and in July a shooting incident near the Roman amphitheatre resulted in some injuries. The political situation remained fairly stable, despite the Iraqi refugee problem, the lack of progress in the Palestinian-Israeli negotiations, and the country’s restive mood following the removal of subsidies.

In July, Jordanian, Palestinian, and Israeli officials concluded negotiations in Amman with World Bank representatives for a feasibility study of a $3 billion project to build a canal that would connect the Red Sea to the Mediterranean via the Dead Sea, where the water level had reached a critical low. Described as a scheme to foster increased cooperation between Israel and its Arab neighbours, the project was criticized by experts as a revival of the 1993 plan offered by Israeli Foreign Minister Shimon Peres at the 1993 Arab summit in Casablanca, Mor.; at that time the project was considered an attempt to effectively separate the Palestinian West Bank from the Gaza Strip and was viewed as a threat to the Egyptian Suez Canal and marine life in the Gulf of Aqaba. The plan was again rejected at the 2002 World Summit on Sustainable Development in Johannesburg.